AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES,
JULY 1, 2006

AN ACT
1 Amending the act of August 26, 1971 (P.L.351, No.91), entitled
2 "An act providing for a State Lottery and administration
3 thereof; authorizing the creation of a State Lottery
4 Commission; prescribing its powers and duties; disposition of
5 funds; violations and penalties therefor; exemption of prizes
6 from State and local taxation and making an appropriation,"
7 further providing for definitions, for physician, certified
8 registered nurse practitioner and pharmacy participation, for
9 reduced assistance, for program generally, for restricted
10 formulary, for reimbursement, for income verification, for
11 contracts and for the pharmaceutical assistance contract for
12 the elderly needs enhancement tier, for pharmacy best
13 practices and cost controls review; further providing for
14 penalties; establishing the coordination of Federal and State
15 benefits; providing for continued eligibility under certain
16 circumstances; and making editorial changes.
17 The General Assembly of the Commonwealth of Pennsylvania
18 hereby enacts as follows:
19 Section 1. Chapter 5 of the act of August 26, 1971 (P.L.351,
20 No.91), known as the State Lottery Law, is amended by adding a
21 subchapter heading to read:

1 SUBCHAPTER A 2 PRELIMINARY PROVISIONS 3 Section 1.1. The definitions of "eligible claimant,"
4 "maximum annual income" and "program" in section 502 of the act,
5 amended or added November 21, 1996 (P.L.741, No.134) and
6 November 26, 2003 (P.L.212, No.37), are amended and the section
7 is amended by adding definitions to read:
8 Section 502. Definitions.
9 The following words and phrases when used in this chapter
10 shall have the meanings given to them in this section unless the
11 context clearly indicates otherwise:
12 * * *
13 "Claimant." An eligible person who is enrolled in the 14 program. 15 * * *
16 "Eligible [claimant] person." A resident of the Commonwealth
17 for no less than 90 days, who is 65 years of age [and over] or 18 older, whose annual income is less than the maximum annual
19 income and who is not otherwise qualified for public assistance
20 under the act of June 13, 1967 (P.L.31, No.21), known as the
21 Public Welfare Code.
22 * * *
23 "Maximum annual income." For PACE eligibility, the term
24 shall mean annual income which shall not exceed $14,500 in the
25 case of single persons nor $17,700 in the case of the combined
26 annual income of persons married to each other. For PACENET 27 eligibility, the term shall mean the annual income limits 28 established under section 519. Persons may, in reporting income
29 to the Department of Aging, round the amount of each source of
30 income and the income total to the nearest whole dollar, whereby
20060S1188B1985 - 2 -

1 any amount which is less than 50¢ is eliminated.
2 "Medicare advantage." A plan of health benefits coverage 3 offered under a policy, contract or plan by an organization 4 certified under 42 U.S.C. § 1395w-26 (relating to establishment 5 of standards) and formerly referred to as Medicare+Choice. 6 "MEDICARE ADVANTAGE PRESCRIPTION DRUG PLAN." A MEDICARE <--
7 ADVANTAGE PLAN THAT PROVIDES QUALIFIED PRESCRIPTION DRUG 8 COVERAGE AS SET FORTH IN THE MEDICARE PRESCRIPTION DRUG, 9 IMPROVEMENT, AND MODERNIZATION ACT OF 2003 (PUBLIC LAW 108-173, 10 117 STAT. 2066). 11 * * *
12 "Part D." A Federal program to offer voluntary prescription 13 drug benefits to Medicare enrollees, as set forth in the 14 Medicare Prescription Drug, Improvement, and Modernization Act 15 of 2003 (Public Law 108-173, 117 Stat. 2066). 16 "Part D plan" or "PDP." A prescription drug plan approved 17 under the Medicare Prescription Drug, Improvement, and 18 Modernization Act of 2003 (Public Law 108-173, 117 Stat. 2066) 19 in the PDP region that includes this Commonwealth, and approved 20 by the Department of Aging of the Commonwealth and the Centers 21 for Medicare and Medicaid Services of the United States for 22 coordination of benefits with the programs established under 23 this chapter. 24 * * *
25 "Program." The Pharmaceutical Assistance Contract for the
26 Elderly (PACE) and the Pharmaceutical Assistance Contract for
27 the Elderly Needs Enhancement Tier (PACENET) as established by
28 this chapter[, unless otherwise specified].
29 * * *
30 "Regional benchmark premium." The average Part D premium
20060S1188B1985 - 3 -

1 calculated annually by the Centers for Medicare and Medicaid 2 Services of the United States for PDPs in the PDP region that 3 includes this Commonwealth. 4 Section 1.2. Chapter 5 of the act is amended by adding a
5 subchapter heading to read:
6 SUBCHAPTER B 7 PROGRAMS 8 Section 2. Section 504 of the act, amended November 26, 2003
9 (P.L.212, No.37), is amended to read:
10 Section 504. Physician, certified registered nurse practitioner
11 and pharmacy participation.
12 Any physician, certified registered nurse practitioner,
13 pharmacist, pharmacy or corporation owned in whole or in part by
14 a physician, certified registered nurse practitioner or
15 pharmacist enrolled as a provider in the program or who has
16 prescribed medication for a claimant [in the program] who is
17 precluded or excluded for cause from the Department of Public
18 Welfare's Medical Assistance Program shall be precluded or
19 excluded from participation in the program. No physician or
20 certified registered nurse practitioner precluded or excluded
21 from the Department of Public Welfare's Medical Assistance
22 Program shall have claims resulting from prescriptions paid for
23 by the program.
24 Section 3. Section 506 of the act, added November 21, 1996 <--
25 (P.L.741, No.134), is amended to read: 26 SECTION 3. SECTIONS 505 AND 506 OF THE ACT, ADDED NOVEMBER <--
27 21, 1996 (P.L.741, NO.134), ARE AMENDED TO READ:
28 SECTION 505. DRUG UTILIZATION REVIEW SYSTEM.
29 (A) ESTABLISHMENT.--THE DEPARTMENT SHALL ENSURE THAT A
30 STATE-OF-THE-ART THERAPEUTIC DRUG UTILIZATION REVIEW SYSTEM IS
20060S1188B1985 - 4 -

1 ESTABLISHED TO MONITOR AND CORRECT MISUTILIZATION OF DRUG
2 THERAPIES.
3 (B) REVIEW.--THE DEPARTMENT SHALL REVIEW UTILIZATION DATA 4 PROVIDED FROM A PDP TO MONITOR INCREASES IN DRUG UTILIZATION 5 AMONG CLAIMANTS AND DETERMINE IF DISEASE MANAGEMENT INTERVENTION 6 IS NEEDED. 7 Section 506. Reduced assistance.
8 Any [eligible] claimant whose prescription drug costs are
9 covered in part by any other plan of assistance or insurance, 10 including Part D, may be required to receive reduced assistance
11 under the provisions of this [chapter] subchapter or be subject 12 to coordination of benefits under this chapter.
13 Section 4. Section 509 of the act, amended November 26, 2003
14 (P.L.212, No.37), is amended to read:
15 Section 509. Program generally.
16 The program shall include the following:
17 (1) Participating pharmacies shall be paid within 21
18 days of the contracting firm receiving the appropriate
19 substantiation of the transaction. Pharmacies shall be
20 entitled to interest for payment not made within the 21-day
21 period at a rate approved by the board.
22 (2) Collection of the copayment by pharmacies shall be
23 mandatory.
24 (3) [Senior citizens participating in the program]
25 Claimants are not required to maintain records of each
26 transaction.
27 (4) A system of rebates or reimbursements to [eligible]
28 claimants for pharmaceutical expenses shall be prohibited.
29 (5) PACE shall include participant copayment schedules
30 for each prescription, including a copayment for generic or
20060S1188B1985 - 5 -

1 multiple-source drugs that is less than the copayment for
2 single-source drugs. The department shall annually calculate
3 the copayment schedules based on the Prescription Drugs and
4 Medical Supplies Consumer Price Index. When the aggregate
5 impact of the Prescription Drugs and Medical Supplies
6 Consumer Price Index equals or exceeds $1, the department
7 shall adjust the copayment schedules. Each copayment schedule
8 shall not be increased by more than $1 in a calendar year.
9 (6) The program payment shall be the lower of the
10 following amounts determined as follows:
11 (i) [90%]88% of the average wholesale cost of the <--
12 prescription drug dispensed:
13 (A) with the addition of a dispensing fee of the
14 greater of:
15 (I) $4 per prescription; or
16 (II) the amount set by the department by
17 regulation;
18 (B) the subtraction of the copayment; and
19 (C) if required, the subtraction of the generic
20 differential; or
21 (ii) the pharmacy's usual charge for the drug
22 dispensed with the subtraction of the copayment and, if
23 required, the subtraction of the generic differential; or
24 (iii) if a generic drug, the most current Federal
25 upper payment limits established in the Medicaid Program
26 under 42 CFR § 447.332 (relating to upper limits for
27 multiple source drugs), plus a dispensing fee of $4 or
28 the amount set by the department by regulation, whichever
29 is greater minus the copayment. The department shall
30 update the average wholesale costs and the Federal upper
20060S1188B1985 - 6 -

1 payment limits at least every 30 days.
2 (7) In no case shall the Commonwealth or any [person
3 enrolled in the program] claimant be charged more than the
4 price of the drug at the particular pharmacy on the date of
5 the sale.
6 (8) The Governor may, based upon certified State Lottery
7 Fund revenue that is provided to both the chairman and
8 minority chairman of the Appropriations Committee of the
9 Senate and the chairman and minority chairman of the
10 Appropriations Committee of the House of Representatives, and
11 after consultation with the board, decrease the eligibility
12 limits established in this [chapter] subchapter.
13 Section 5. Section 510 of the act, amended or added November
14 21, 1996 (P.L.741, No.134) and November 30, 2004 (P.L.1722,
15 No.219), is amended to read:
16 Section 510. Generic drugs.
17 (a) In general.--Notwithstanding any other statute or
18 regulation, a brand name product shall be dispensed and not
19 substituted with an A-rated generic therapeutically equivalent
20 drug if it is less expensive to the program. If a less expensive
21 A-rated generic therapeutically equivalent drug is available for
22 dispensing to a claimant, the provider shall dispense the A-
23 rated generic therapeutically equivalent drug to the claimant.
24 The department shall reimburse providers based upon the most
25 current listing of Federal upper payment limits established in
26 the Medicaid Program under 42 CFR § 447.332 (relating to upper
27 limits for multiple source drugs), plus a dispensing fee as set
28 forth in section 509(6). The department shall update the average
29 wholesale costs and the Federal upper payment limits on a
30 regular basis, at least every 30 days. The department shall not
20060S1188B1985 - 7 -

1 reimburse providers for brand name products except in the
2 following circumstances:
3 (1) There is no A-rated generic therapeutically
4 equivalent drug available on the market. This paragraph does
5 not apply to the lack of availability of an A-rated generic
6 therapeutically equivalent drug in the providing pharmacy
7 unless it can be shown to the department that the provider
8 made reasonable attempts to obtain the A-rated generic
9 therapeutically equivalent drug or that there was an
10 unforeseeable demand and depletion of the supply of the A-
11 rated generic therapeutically equivalent drug. In either
12 case, the department shall reimburse the provider for [90%] <--
13 88% of the average wholesale cost plus a dispensing fee based <--
14 on the least expensive A-rated generic therapeutically
15 equivalent drug for the brand drug dispensed.
16 (2) An A-rated generic therapeutically equivalent drug
17 is deemed by the department, in consultation with a
18 utilization review committee, to have too narrow a
19 therapeutic index for safe and effective dispensing in the
20 community setting. The department shall notify providing
21 pharmacies of A-rated generic therapeutically equivalent
22 drugs that are identified pursuant to this paragraph on a
23 regular basis.
24 (3) The Department of Health has determined that a drug
25 shall not be recognized as an A-rated generic therapeutically
26 equivalent drug for purpose of substitution under section
27 5(b) of the act of November 24, 1976 (P.L.1163, No.259),
28 referred to as the Generic Equivalent Drug Law.
29 (4) At the time of dispensing, the provider has a
30 prescription on which the brand name drug dispensed is billed
20060S1188B1985 - 8 -

1 to the program by the provider at a usual and customary
2 charge which is equal to or less than the least expensive
3 usual and customary charge of any A-rated generic
4 therapeutically equivalent drug reasonably available on the
5 market to the provider.
6 (5) The brand name drug is less expensive to the
7 program.
8 (b) Generic not accepted.--If a claimant chooses not to
9 accept the A-rated generic therapeutically equivalent drug
10 required by subsection (a), the claimant shall be liable for the
11 copayment and 70% of the average wholesale cost of the brand
12 name drug.
13 (c) Generic drugs not deemed incorrect substitution.--The
14 dispensing of an A-rated generic therapeutically equivalent drug
15 in accordance with this [chapter] subchapter shall not be deemed
16 incorrect substitution under section 6(a) of the Generic
17 Equivalent Drug Law.
18 (d) Medical exception.--A medical exception process shall be
19 established by the department, which shall be published as a
20 notice in the Pennsylvania Bulletin and distributed to providers
21 and recipients in the program.
22 Section 6. Sections 512 and 515 of the act, amended November <--
23 26, 2003 (P.L.212, No.37), are amended to read: 24 SECTION 6. SECTION 512 OF THE ACT, AMENDED NOVEMBER 26, 2003 <--
25 (P.L.212, NO.37), IS AMENDED TO READ:
26 Section 512. [Restricted formulary]FORMULARY. <--
27 The department may establish a [restricted] formulary of the <--
28 drugs which will not be reimbursed by the program. This
29 formulary shall include [only] experimental drugs and drugs on <--
30 the Drug Efficacy Study Implementation List prepared by CMS. A
20060S1188B1985 - 9 -

1 medical exception may be permitted by the department for
2 reimbursement of a drug on the Drug Efficacy Study
3 Implementation List upon declaration of its necessity on the
4 prescription by the treating physician or certified registered
5 nurse practitioner, except that, for DESI drugs for which the
6 FDA has issued a Notice for Opportunity Hearing (NOOH) for the
7 purpose of withdrawing the New Drug Application approved for
8 that drug, reimbursement coverage shall be discontinued under
9 the provisions of this [chapter] subchapter.
10 SECTION 6.1. SECTION 513 OF THE ACT, ADDED NOVEMBER 21, 1996 <--
11 (P.L.741, NO.134), IS AMENDED TO READ:
12 SECTION 513. MAIL ORDER SYSTEM.
13 (A) THE DEPARTMENT MAY NOT ENTER INTO A CONTRACT WITH A
14 PRIVATE CONTRACTOR FOR AN EXCLUSIVE MAIL-ORDER SYSTEM FOR THE
15 DELIVERY OF PRESCRIPTION DRUGS UNDER THIS PROGRAM. ONLY MAIL-
16 ORDER PHARMACY SERVICES PROVIDED BY PHARMACIES WHICH ARE
17 LICENSED BY THE COMMONWEALTH AND WHICH HAVE THEIR PRINCIPAL
18 PLACE OF BUSINESS WITHIN THIS COMMONWEALTH MAY PARTICIPATE AS
19 PROVIDERS UNDER THE PROGRAM. THE DEPARTMENT SHALL DEVELOP AND
20 PROMULGATE SPECIFIC REGULATIONS GOVERNING THE PRACTICE OF MAIL-
21 ORDER PHARMACY AND OTHER ENROLLED PROVIDERS TO INCLUDE THE
22 FOLLOWING MINIMUM STANDARDS OF PRACTICE TO ENSURE THE HEALTH,
23 SAFETY AND WELFARE OF PROGRAM PARTICIPANTS:
24 (1) THE APPROPRIATE METHOD OR METHODS BY WHICH SUCH
25 PHARMACIES SHALL VERIFY THE IDENTITY OF THE PROGRAM RECIPIENT
26 AND THE AUTHENTICITY OF PRESCRIPTIONS RECEIVED.
27 (2) THE APPROPRIATE METHOD OR METHODS BY WHICH SUCH
28 PHARMACIES SHALL MAIL OR DELIVER PRESCRIPTION DRUGS TO
29 PROGRAM RECIPIENTS ENSURING, TO THE MAXIMUM EXTENT POSSIBLE,
30 THAT THE INTENDED PROGRAM RECIPIENT IS THE ACTUAL ULTIMATE
20060S1188B1985 - 10 -

1 RECIPIENT OF ANY PRESCRIPTION DISPENSED BY SUCH PHARMACIES.
2 (3) THE APPROPRIATE METHOD OR METHODS BY WHICH SUCH
3 PHARMACIES SHALL COMMUNICATE WITH PROGRAM PARTICIPANTS IN
4 EMERGENCY SITUATIONS.
5 (B) NOTWITHSTANDING ANY PROVISION OF LAW TO THE CONTRARY, A 6 CLAIMANT MAY USE ANY AND ALL PHARMACY SERVICES OFFERED BY A PDP 7 OR MEDICARE ADVANTAGE PRESCRIPTION DRUG PLAN TO RECEIVE DRUGS 8 AND SHALL BE PERMITTED TO CONTINUE TO USE THOSE SERVICES 9 THROUGHOUT THE NONCOVERAGE PHASE. 10 (C) NOTHING IN THIS SECTION SHALL REQUIRE A CLAIMANT TO USE 11 MAIL-ORDER SERVICES. 12 SECTION 6.2. SECTION 515 OF THE ACT, AMENDED NOVEMBER 26,
13 2003 (P.L.212, NO.37), IS AMENDED TO READ:
14 Section 515. Reimbursement.
15 For-profit third-party insurers, health maintenance
16 organizations, preferred provider organizations [and], not-for-
17 profit prescription plans, Medicare advantage plans and PDPs 18 shall be responsible for any payments made to a providing
19 pharmacy on behalf of a claimant covered by such a third party.
20 Final determination as to the existence of third-party coverage
21 shall be the responsibility of the department.
22 Section 7. Sections 517 and 518 of the act, added November
23 21, 1996 (P.L.741, No.134), are amended to read:
24 Section 517. Income verification.
25 (a) Procedure.--The department shall annually verify the
26 income of [eligible] claimants. The department shall verify the
27 income of [eligible] claimants by requiring income documentation
28 from the claimants. An application for benefits under this
29 [chapter] subchapter shall constitute a waiver to the department
30 of all relevant confidentiality requirements relating to the
20060S1188B1985 - 11 -

1 claimant's Pennsylvania State income tax information in the
2 possession of the Department of Revenue. The Department of
3 Revenue shall provide the department with the necessary income
4 information shown on the claimant's Pennsylvania State income
5 tax return solely for income verification purposes.
6 (b) Information confidential.--It shall be unlawful for any
7 officer, agent or employee of the department to divulge or make
8 known in any manner whatsoever any information gained through
9 access to the Department of Revenue information except for
10 official income verification purposes under this [chapter]
11 subchapter or as authorized under section 535.
12 (c) Penalty.--A person who violates this [act] section 13 commits a misdemeanor and shall, upon conviction, be sentenced
14 to pay a fine of not more than $1,000 or to imprisonment for not
15 more than one year, or both, together with the cost of
16 prosecution, and, if the offender is an officer or employee of
17 the Commonwealth, he shall be dismissed from office or
18 discharged from employment.
19 (d) Coordination with Department of Public Welfare.--To the
20 extent possible, the department and the Department of Public
21 Welfare shall coordinate efforts to facilitate the application
22 and enrollment of eligible older people in the Medicaid Healthy
23 Horizons Program by processing these applications at senior
24 citizens centers and other appropriate facilities providing
25 services to the elderly.
26 Section 518. Contract.
27 The department is authorized to enter into a contract
28 providing for prescription drugs to [eligible persons] claimants 29 pursuant to this [chapter] subchapter. The department shall
30 select a proposal that includes, but is not limited to, the
20060S1188B1985 - 12 -

1 criteria set forth in this [chapter] subchapter.
2 Section 8. Section 519 of the act, amended November 26, 2003
3 (P.L.212, No.37), is amended to read:
4 Section 519. The Pharmaceutical Assistance Contract for the
5 Elderly Needs Enhancement Tier.
6 (a) Establishment.--There is hereby established within the
7 department a program to be known as the Pharmaceutical
8 Assistance Contract for the Elderly Needs Enhancement Tier
9 [(PACENET)]. <--
10 (b) PACENET eligibility.--A [claimant] person with an annual
11 income of not less than $14,500 and not more than $23,500 in the
12 case of a single person and of not less than $17,700 and not
13 more than $31,500 in the case of the combined income of persons
14 married to each other shall be eligible for enhanced
15 pharmaceutical assistance under this section. A person may, in
16 reporting income to the department, round the amount of each
17 source of income and the income total to the nearest whole
18 dollar, whereby any amount which is less than 50¢ is eliminated.
19 [(c) Deductible.--Upon enrollment in PACENET, eligible
20 claimants in the income ranges set forth in subsection (b) shall
21 be required to meet a deductible in unreimbursed prescription
22 drug expenses of $40 per person per month. The $40 monthly
23 deductible shall be cumulative and shall be applied to
24 subsequent months to determine eligibility. The cumulative
25 deductible shall be determined on an enrollment year basis for
26 an annual total deductible not to exceed $480 in a year. To
27 qualify for the deductible set forth in this subsection the
28 prescription drug must be purchased for the use of the eligible
29 claimant from a provider as defined in this chapter. The
30 department, after consultation with the board, may approve an
20060S1188B1985 - 13 -

1 adjustment in the deductible on an annual basis.]
2 (c.1) Premium.--In those instances in which a PACENET 3 claimant does not enroll in Part D IS NOT ENROLLED IN PART D <--
4 PURSUANT TO SECTION 533, the claimant shall be required to pay a 5 monthly premium equivalent to the regional benchmark premium. 6 (d) Copayment.--
7 (1) For [eligible] claimants under this section, the
8 copayment schedule shall be:
9 (i) eight dollars for noninnovator multiple source
10 drugs as defined in section 702; or
11 (ii) fifteen dollars for single-source drugs and
12 innovator multiple-source drugs as defined in section
13 702.
14 (2) The department shall annually calculate the
15 copayment schedules based on the Prescription Drugs and
16 Medical Supplies Consumer Price Index. When the aggregate
17 impact of the Prescription Drugs and Medical Supplies
18 Consumer Price Index equals or exceeds $1, the department
19 shall adjust the copayment schedules. Each copayment schedule
20 shall not be increased by more than $1 in a calendar year.
21 Section 9. Section 520.1 of the act, added November 26, 2003
22 (P.L.212, No.37), is amended to read:
23 [Section 520.1. Pharmacy best practices and cost controls
24 review.
25 (a) Review process.--The secretary shall review and
26 recommend pharmacy best practices and cost control mechanisms
27 that maintain high quality in prescription drug therapies but
28 are designed to reduce the cost of providing prescription drugs
29 for PACE and PACENET enrollees, including:
30 (1) A list of covered prescription drugs with
20060S1188B1985 - 14 -

1 recommended copayment schedules. In developing the schedules,
2 the department shall take into account the standards
3 published in the United States Pharmacopeia Drug Information.
4 (2) A drug utilization review procedure, incorporating a
5 prescription review process for copayment schedules.
6 (3) A step therapy program that safely and effectively
7 utilizes in a sequential manner the least costly
8 pharmacological therapy to treat the symptoms of or effect a
9 cure for the medical condition or illness for which the
10 therapy is prescribed.
11 (4) Education programs designed to provide information
12 and education on the therapeutic and cost-effective
13 utilization of prescription drugs to physicians, pharmacists,
14 certified registered nurse practitioners and other health
15 care professionals authorized to prescribe and dispense
16 prescription drugs.
17 (b) Report and recommendations.--No later than two years
18 from the effective date of this section, the department shall
19 submit a report with recommendations to the Aging and Youth
20 Committee, the Appropriations Committee and the Public Health
21 and Welfare Committee of the Senate and the Aging and Older
22 Adult Services Committee, the Appropriations Committee and the
23 Health and Human Services Committee of the House of
24 Representatives. The report shall include information regarding
25 the efficacy of the pharmacy best practices and control
26 mechanisms set forth in subsection (a), including recommended
27 copayment schedules with impacted classes of drugs, exceptions,
28 cost effectiveness, improved drug utilization and therapies,
29 movement of market share and increased utilization of generic
30 drugs.]
20060S1188B1985 - 15 -

1 Section 10. Section 521 of the act, amended or added
2 November 21, 1996 (P.L.741, No.134) and November 26, 2003
3 (P.L.212, No.37), is amended to read:
4 Section 521. Penalties.
5 (a) Prohibited acts.--It shall be unlawful for any person to
6 submit a false or fraudulent claim or application under this
7 [chapter] subchapter, including, but not limited to:
8 (1) aiding or abetting another in the submission of a
9 false or fraudulent claim or application;
10 (2) receiving benefits or reimbursement under a private,
11 Federal or State program for prescription assistance and
12 claiming or receiving duplicative benefits hereunder;
13 (3) soliciting, receiving, offering or paying any
14 kickback, bribe or rebate, in cash or in kind, from or to any
15 person in connection with the furnishing of services under
16 this [chapter] subchapter;
17 (4) engaging in a pattern of submitting claims that
18 repeatedly uses incorrect National Drug Code numbers [for the
19 purpose of obtaining wrongful enhanced reimbursement]; or
20 (5) otherwise violating any provision of this [chapter]
21 subchapter.
22 (b) Civil penalty.--In addition to any appropriate criminal
23 penalty for prohibited acts under this [chapter] subchapter 24 whether or not that act constitutes a crime under 18 Pa.C.S.
25 (relating to crimes and offenses), a provider who violates this
26 section may be liable for a civil penalty in an amount not less
27 than $500 and not more than $10,000 for each violation of this
28 act which shall be collected by the department. Each violation
29 constitutes a separate offense. If the department collects three
30 or more civil penalties against the same provider, the provider
20060S1188B1985 - 16 -

1 shall be ineligible to participate in either PACE or PACENET for
2 a period of one year. If more than three civil penalties are
3 collected from any provider, the department may determine that
4 the provider is permanently ineligible to participate in PACE or
5 PACENET.
6 (c) Suspension of license.--The license of any provider who
7 has been found guilty under this [chapter] subchapter shall be
8 suspended for a period of one year. The license of any provider
9 who has committed three or more violations of this [chapter]
10 subchapter may be suspended for a period of one year.
11 (d) Reparation.--Any provider, [recipient] claimant or other
12 person who is found guilty of a crime for violating this
13 [chapter] subchapter shall repay three times the value of the
14 material gain received. In addition to the civil penalty
15 authorized pursuant to subsection (b), the department may
16 require the provider, [recipient] claimant or other person to
17 repay up to three times the value of any material gain to PACE
18 or PACENET.
19 Section 11. Chapter 5 of the act is amended by adding a
20 subchapter to read:
21 SUBCHAPTER C 22 COORDINATION OF FEDERAL AND STATE BENEFITS 23 Section 531. Definitions. 24 The following words and phrases when used in this subchapter 25 shall have the meanings given to them in this section unless the 26 context clearly indicates otherwise: 27 "LIS." Low-income subsidy assistance from Part D provided by 28 the Medicare Prescription Drug, Improvement, and Modernization 29 Act of 2003 (Public Law 108-173, 117 Stat. 2066) to help pay for 30 annual premiums, deductibles and copayments charged to
20060S1188B1985 - 17 -

1 individuals enrolled in Part D by prescription plans approved 2 under that act. 3 "Medicare Advantage Prescription Drug Plan." A Medicare <--
4 advantage plan that provides qualified prescription drug 5 coverage as set forth in the Medicare Prescription Drug, 6 Improvement, and Modernization Act of 2003 (Public Law 108-173, 7 117 Stat. 2066). 8 "Noncoverage phase." The deductible phase or the difference 9 between Part D initial coverage and catastrophic coverage for 10 certain Part D enrollees, as set forth in section 1860D-2 of the 11 Medicare Prescription Drug, Improvement, and Modernization Act 12 of 2003 (Public Law 108-173, 117 Stat. 2066). 13 "Part D eligible individual." An eligible person who is 14 entitled to benefits under Part A of Medicare, or enrolled in 15 Part B of Medicare, as specified in section 1860D-1 of the 16 Medicare Prescription Drug, Improvement, and Modernization Act 17 of 2003 (Public Law 108-173, 117 Stat. 2066). 18 "Part D enrollee." A claimant enrolled in a Part D plan. 19 "Part D provider." A pharmacy or other prescription drug 20 dispenser authorized by a Part D enrollee's Part D plan. 21 Section 532. Purpose. 22 The benefits available to a claimant enrolled in the program 23 under Subchapter B shall be a supplement to the benefits 24 available under Part D. The department may require claimants to 25 utilize Part D benefits prior to utilizing benefits provided 26 under either program and shall coordinate the benefits of the 27 programs with those provided under Part D. 28 Section 533. Powers of the department; notifications. <--
29 (a) Powers.--The department may: 30 (1) Identify the Part D plan or plans with which the
20060S1188B1985 - 18 -

1 department has entered into a contract under section 534 that 2 meet the prescription drug needs and pharmacy preferences of 3 a claimant. 4 (2) Recommend that the claimant enroll in the Part D 5 plan that meets the prescription drug needs and pharmacy 6 preferences of the claimant in the most cost-effective manner 7 for the Commonwealth. 8 (3) Initiate enrollment on behalf of the claimant in the 9 Part D plan recommended by the department unless the claimant 10 notifies the department that the claimant does not wish to 11 enroll in the Part D plan. 12 (4) File and pursue appeals with a claimant's Part D 13 plan to convert noncovered drugs to covered drugs or 14 nonpreferred brand drugs to preferred drugs. 15 (5) Assist claimants the department believes to be 16 eligible for the LIS in making an application to the Social 17 Security Administration. 18 (b) Notifications.--When recommending enrollment in a Part D 19 plan to claimants, the department shall provide at least ten 20 days for the claimant to decline enrollment and shall notify 21 claimants of: 22 (1) The ability to decline enrollment in a Part D plan. 23 (2) The ability to file and pursue appeals to a Part D 24 plan on their own behalf. 25 (3) The possibility that their choice of plan may affect 26 their medical coverage if they are enrolled in a Medicare 27 Advantage Plan. 28 SECTION 533. POWERS OF THE DEPARTMENT. <--
29 THE DEPARTMENT SHALL: 30 (1) IDENTIFY THE PART D PLAN OR PLANS WITH WHICH THE
20060S1188B1985 - 19 -

1 DEPARTMENT HAS ENTERED INTO A CONTRACT UNDER SECTION 534 THAT 2 MEET THE PRESCRIPTION DRUG NEEDS AND PHARMACY PREFERENCES OF 3 A CLAIMANT. 4 (2) RECOMMEND THAT THE CLAIMANT ENROLL IN THE PART D 5 PLAN OR PROGRAM THAT MEETS THE PRESCRIPTION DRUG NEEDS AND 6 PHARMACY PREFERENCES OF THE CLAIMANT IN THE MOST COST- 7 EFFECTIVE MANNER FOR THE COMMONWEALTH. 8 (3) INITIATE ENROLLMENT ON BEHALF OF THE CLAIMANT IN THE 9 PART D PLAN RECOMMENDED BY THE DEPARTMENT UNLESS THE CLAIMANT 10 NOTIFIES THE DEPARTMENT THAT THE CLAIMANT WISHES TO ENROLL IN 11 ANOTHER PART D PLAN. 12 (4) FILE AND PURSUE APPEALS IN ACCORDANCE WITH CMS 13 REGULATIONS WITH A CLAIMANT'S PART D PLAN ON THE CLAIMANT'S 14 BEHALF TO REQUEST EXCEPTIONS TO THE PLAN'S TIERED COST- 15 SHARING STRUCTURE OR TO REQUEST A NONFORMULARY PART D DRUG. 16 (5) ASSIST CLAIMANTS THE DEPARTMENT BELIEVES TO BE 17 ELIGIBLE FOR THE LIS IN MAKING AN APPLICATION TO THE SOCIAL 18 SECURITY ADMINISTRATION. 19 (6) PROVIDE AT LEAST TEN DAYS FOR THE CLAIMANT TO 20 DECLINE ENROLLMENT IN THE RECOMMENDED PLAN. 21 (7) DEVELOP AND DISTRIBUTE LANGUAGE, WHEN RECOMMENDING 22 ENROLLMENT, NOTIFYING CLAIMANTS OF: 23 (I) THE ABILITY TO DECLINE ENROLLMENT IN THE 24 RECOMMENDED PART D PLAN. 25 (II) THE ABILITY TO FILE AND PURSUE APPEALS TO THE 26 RECOMMENDED PART D PLAN ON THEIR OWN BEHALF. 27 (III) THE POSSIBILITY THAT THEIR CHOICE OF PLAN MAY 28 AFFECT THEIR MEDICAL COVERAGE IF THEY ARE ENROLLED IN A 29 MEDICARE ADVANTAGE PLAN, IF APPLICABLE. 30 Section 534. Coordination of benefits.
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1 (a) General coordination.--In addition to the specific 2 provisions of subsection (b), the department shall establish 3 standards and minimum requirements it deems necessary to allow 4 for the coordination of benefits between the program and Part D. 5 (b) Specific coordination provisions.--The following 6 provisions shall apply to claimants who are also Part D 7 enrollees: 8 (1) The primary payor shall be the PDP or the Medicare 9 Advantage Prescription Drug Plan, as appropriate. 10 (2) Part D enrollees shall be required to utilize 11 providers authorized by their PDPs or Medicare Advantage 12 Prescription Drug Plans. 13 (3) The program shall pay the premium assessed by a PACE 14 enrollee's PDP or, with respect to the prescription drug 15 plan, Medicare Advantage Prescription Drug Plan in an amount 16 not to exceed the regional benchmark premium and any 17 copayments in excess of those set forth in section 509. 18 (4) Part D enrollees enrolled in PACENET shall pay the 19 Part D premiums charged by their PDP or, with respect to the 20 prescription drug plan, Medicare Advantage Prescription Drug 21 Plan and the program shall pay any copayments in excess of 22 those set forth in section 519. 23 (5) For Part D enrollees enrolled in PACE who are not 24 eligible for LIS, PACE shall reimburse Part D providers for 25 prescription drugs in any noncoverage phase of Part D. For 26 Part D enrollees enrolled in PACENET, PACENET shall reimburse 27 Part D providers for prescription drugs in any noncoverage 28 phase of Part D. 29 (6) The provisions of Chapter 7 shall apply to all 30 payments made by the program in the noncoverage phase.
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1 (7) The department shall advise a claimant on the 2 various benefits and drugs provided by each PDP approved by 3 the department as follows: 4 (i) Analyze the claimant's eligibility for and 5 assist the claimant in applying for LIS. 6 (ii) Identify the claimant's prescription drug needs 7 and preferred pharmacy. 8 (iii) Assist the claimant in enrolling in the PDP 9 that best fits the claimant's prescription drug needs. 10 (iv) File and pursue appeals with the claimant's PDP <--
11 to convert noncovered drugs to covered drugs or 12 nonpreferred brand drugs to preferred drugs. 13 (IV) FILE AND PURSUE APPEALS IN ACCORDANCE WITH CMS <--
14 REGULATIONS WITH A CLAIMANT'S PART D PLAN ON THE 15 CLAIMANT'S BEHALF TO REQUEST EXCEPTIONS TO THE PLAN'S 16 TIERED COST-SHARING STRUCTURE OR TO REQUEST A 17 NONFORMULARY PART D DRUG. 18 (8) NOTWITHSTANDING THE PROVISIONS OF SECTIONS 511 AND 19 513(A), FOR PURPOSES OF COORDINATION OF BENEFITS WITH 20 MEDICARE PART D PLANS, AND TO MINIMIZE DISRUPTION TO 21 ENROLLEES, THE PROGRAM SHALL BE AUTHORIZED TO REIMBURSE PART 22 D PROVIDERS, INCLUDING MAIL-ORDER PHARMACIES, FOR MORE THAN A 23 30-DAY SUPPLY OF PRESCRIPTION DRUGS. 24 (c) Contracts.--The department is authorized to enter into 25 contracts with Part D plans to provide for prescription drugs to 26 Part D enrollees through Part D pursuant to this subchapter. A 27 Part D plan selected by the department shall meet all of the 28 following requirements: 29 (1) The Part D plan has a retail pharmacy network that 30 includes at least 90% of the pharmacies in the PACE network.
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1 (2) The Part D plan has a premium at or below the 2 regional benchmark premium. 3 (d) Rebates.--The department may only receive rebates as 4 provided in Chapter 7 where the program is the only payor for a 5 Part D enrollee's covered prescription drugs. 6 Section 535. Financial resource information. 7 (a) Procedure.--The department may obtain information on the 8 financial resources of a Part D eligible individual for the 9 purpose of determining the individual's potential eligibility 10 for the LIS. The authority granted under this subsection shall 11 be exercised only with respect to a Part D eligible individual 12 who has income which is below the applicable threshold 13 established by the Medicare Prescription Drug, Improvement, and 14 Modernization Act of 2003 (Public Law 108-173, 117 Stat. 2066) 15 for qualification under the LIS. 16 (b) Waiver.--An application by a Part D eligible individual 17 for enrollment in the program shall constitute a waiver to the 18 department of relevant confidentiality requirements relating to 19 the prospective claimant's financial resources in the possession 20 of any Commonwealth agency or third party when the information 21 is required for the purposes listed under subsection (a). This 22 waiver shall extend to the application phase and throughout the 23 entire time the claimant is in the program. 24 (c) Information confidential.-- 25 (1) It shall be unlawful for an officer, agent or 26 employee of the department to divulge or make known 27 information obtained from a Commonwealth agency or third 28 party except for the purposes under subsection (a). 29 (2) A person that violates this subsection commits a 30 misdemeanor of the third degree and shall, upon conviction,
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1 be sentenced to pay a fine of not more than $1,000 or to 2 imprisonment for not more than one year, or both, and to pay 3 the cost of prosecution. If the offender is an officer or 4 employee of the Commonwealth, the offender shall be dismissed 5 from office or discharged from employment. 6 (D) UPON REQUEST OF THE CLAIMANT, THE DEPARTMENT SHALL <--
7 PROVIDE A COPY OF ANY AND ALL FILINGS THAT ARE PROCESSED OR 8 SUBMITTED UNDER THIS SUBCHAPTER. 9 Section 536. Reimbursement. 10 For-profit insurers, health maintenance organizations, 11 preferred provider organizations, not-for-profit prescription 12 plans, Medicare Advantage plans and PDPs shall be responsible 13 for any payments made to a pharmacy on behalf of a Part D 14 enrollee covered by any such third party. Final determination as 15 to the existence of third-party coverage shall be the 16 responsibility of the department. 17 SECTION 537. COLLECTION. <--
18 THE DEPARTMENT SHALL HAVE THE AUTHORITY TO COLLECT ANY 19 AMOUNTS FROM THE PAYMENT BY THE DEPARTMENT OF PHARMACY CLAIMS 20 THAT ARE THE RESPONSIBILITY OF A PDP OR MEDICARE ADVANTAGE 21 PRESCRIPTION DRUG PLAN AS A PRIMARY PAYOR PURSUANT TO SECTION 22 534(B)(1). 23 Section 12. Section 706 of the act, added November 21, 1996
24 (P.L.741, No.134), is amended to read:
25 Section 706. Excessive pharmaceutical price inflation discount.
26 (a) General rule.--A discount shall be provided to the
27 department for all covered prescription drugs except those 28 excluded under subsection (d). The discount shall be calculated
29 as follows:
30 (1) For each quarter for which a rebate under section
20060S1188B1985 - 24 -

1 705(a) and (b) is to be paid after December 31, 1991, and
2 before January 1, 1997, the average manufacturer price for
3 each dosage form and strength of a covered prescription drug
4 shall be compared to the average manufacturer price for the
5 same form and strength in the previous calendar year, and a
6 percentage increase shall be calculated.
7 (2) For each quarter under paragraph (1), the average
8 percentage increase in the Producer Price Index for
9 Pharmaceuticals over the same quarter in the previous
10 calendar year shall be calculated.
11 (3) If the calculation under paragraph (1) is greater
12 than the calculation under paragraph (2), the discount amount
13 for each quarter shall be equal to the product of:
14 (i) the difference between the calculations under
15 paragraphs (1) and (2); and
16 (ii) the total number of units of each dosage form
17 and strength reimbursed by PACE and General Assistance
18 and the average manufacturer price reported by the
19 manufacturer under section 704(c)(1).
20 (b) Revised general rule.--A discount shall be provided to
21 the department for all covered prescription drugs EXCEPT THOSE <--
22 EXCLUDED UNDER SUBSECTION (D). The discount shall be calculated
23 as follows:
24 (1) For each quarter for which a rebate under section
25 705(a) and (c) is to be paid after December 31, 1996, the
26 average manufacturer price for each dosage form and strength
27 of a covered prescription drug shall be compared to the
28 average manufacturer price for the same form and strength in
29 the previous calendar year and a percentage increase shall be
30 calculated.
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1 (2) For each quarter under paragraph (1), the average
2 percentage increase in the Consumer Price Index-Urban over
3 the same quarter in the previous calendar year shall be
4 calculated.
5 (3) If the calculation under paragraph (1) is greater
6 than the calculation under paragraph (2), the discount amount
7 for each quarter shall be equal to the product of:
8 (i) the difference between the calculations under
9 paragraphs (1) and (2); and
10 (ii) the total number of units of each dosage form
11 and strength reimbursed by PACE, PACENET and designated
12 pharmaceutical programs and the average manufacturer
13 price reported by the manufacturer under section
14 704(c)(1).
15 (c) New bimarketed drugs.--For covered prescription drugs
16 that have not been marketed for a full calendar year, subsection
17 (a) shall apply after the covered prescription drug has been on
18 the market for four consecutive quarters. The drug's initial
19 average manufacturer price shall be based on the first day of
20 the first quarter that the drug was marketed.
21 (d) Applicability.--This section shall not apply to a 22 noninnovator multiple-source prescription drug or generic 23 prescription drug. 24 Section 13. Section 2103 of the act, added November 26, 2003
25 (P.L.212, No.37), is amended to read:
26 Section 2103. Federal programs.
27 If the Federal Government enacts pharmacy programs similar to
28 PACE or PACENET, the State programs shall be construed to only
29 supplement the Federal pharmacy programs.[, and all] All persons
30 qualified for coverage under [the] a Federal pharmacy program
20060S1188B1985 - 26 -

1 [shall], including the prescription drug benefit program 2 provided by the Medicare Prescription Drug, Improvement, and 3 Modernization Act of 2003 (Public Law 108-173, 117 Stat. 2066), 4 may be required by the department to utilize [that] the Federal
5 program before utilizing any State program.
6 Section 14. (a) Notwithstanding any other provision of law
7 to the contrary, persons who, as of December 31, 2004 2005, are <--
8 enrolled in the PACE or PACENET program as defined in section
9 502 of the act shall remain eligible for the PACE or PACENET
10 program if the maximum income limit is exceeded due solely to a
11 Social Security cost-of-living adjustment.
12 (b) Funding, to the extent authorized by section
13 306(b)(1)(vii) of the act of June 26, 2001 (P.L.755, No.77),
14 known as the Tobacco Settlement Act, shall continue to be
15 appropriated to the Pharmaceutical Assistance Contract for the
16 Elderly Fund to support the program expansions contained in this
17 section. The Department of Aging shall also designate funds from
18 the fund to continue eligibility under this section; however,
19 these funds shall not exceed the funding designated under
20 section 306(b)(1)(vii) of the Tobacco Settlement Act. If
21 eligibility under this section requires that funds from the fund
22 exceed those from section 306(b)(1)(vii) of the Tobacco
23 Settlement Act, then the Department of Aging is authorized to
24 determine eligibility requirements.
25 (c) Eligibility in the PACE and PACENET programs pursuant to <--
26 this section shall expire December 31, 2007. 27 (C) ELIGIBILITY IN THE PACE PROGRAM PURSUANT TO THIS SECTION <--
28 SHALL EXPIRE DECEMBER 31, 2006.
29 (D) ELIGIBILITY IN THE PACENET PROGRAM PURSUANT TO THIS
30 SECTION SHALL EXPIRE DECEMBER 31, 2007.
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